10.C.
City Council Meeting
- Meeting Date:
- 12/16/2014
- From:
- Andy Wagemaker, Revenue Director
Information
TITLE:
Consideration and Agreement: Intergovernmental Agreement (IGA) with Arizona Department of Revenue for Transaction Privilege (Sales) Tax Licensing through December 31, 2015.
RECOMMENDED ACTION:
-
Approve IGA with Arizona Department of Revenue for Transaction Privilege (Sales) Tax Licensing through December 31, 2015.
Policy Decision or Reason for Action:
On October 7, 2014, the Arizona Department of Revenue officially postponed the implementation of the single point of administration provisions of Transaction Privilege Tax (TPT) Simplification for one additional year, until January 1, 2016. The original legislation called for the takeover of all TPT licensing activities by the state on January 1, 2015. With the postponement, by law, the City of Flagstaff is unable to issue TPT licenses effective January 1, 2015. This IGA gives the City the ability to issue TPT licenses for an additional year, through December 31, 2015.
Subsidiary Decisions Points: None.
Subsidiary Decisions Points: None.
Financial Impact:
If the City chooses to not approve the IGA and not have the authority to issue TPT Licenses, the City would lose approximately $30,000 in uncollected license fees. In addition, the City may not receive the sales tax revenues from unlicensed businesses that do not remit taxes to the City.
Connection to Council Goal and/or Regional Plan:
Effective governance.
Has There Been Previous Council Decision on This:
No.
Options and Alternatives:
1) Approve the agreement and issue TPT licenses through December 31, 2015. The Arizona Department of Revenue will assume TPT license issuance on behalf of the City beginning January 1, 2016.
2) Do not approve the agreement and do not issue TPT licenses through December 31, 2015. The Arizona Department of Revenue will assume TPT license issuance on behalf of the City beginning January 1, 2016.
2) Do not approve the agreement and do not issue TPT licenses through December 31, 2015. The Arizona Department of Revenue will assume TPT license issuance on behalf of the City beginning January 1, 2016.
Background/History:
In May, 2012, Governor Jan Brewer issued Executive Order 2012-01 calling for the creation of a Transaction Privilege Tax Simplification Task Force. The Task Force was charged with:
...reviewing, identifying, or developing proposals that would simplify the TPT code and TPT practice in order to alleviate taxpayer frustration, improve compliance, and avoid redundancies. Specific areas of focus shall include, but not be limited to:
a. options for a single point administration to avoid redundancies;
b. identification of differences between state statute and the Model City Tax Code; and
c. standardization of definitions of taxable transactions between taxing authorities.
All three areas noted above were significantly modified by state legislation since the completion of the Task Force, as noted below.
a. options for a single point administration to avoid redundancies;
Original legislation called for the single point administration changeover to take place on January 1, 2015. The postponement by the Arizona Department of Revenue provision has moved the date to January 1, 2016.
b. identification of differences between state statute and the Model City Tax Code; and
c. standardization of definitions of taxable transactions between taxing authorities.
These two areas have been modified by multiple updates to the Model City Tax Code and the State of Arizona tax codes over the past few years. More modifications are expected in the future as the Cities and State continue to work through the simplification process.
...reviewing, identifying, or developing proposals that would simplify the TPT code and TPT practice in order to alleviate taxpayer frustration, improve compliance, and avoid redundancies. Specific areas of focus shall include, but not be limited to:
a. options for a single point administration to avoid redundancies;
b. identification of differences between state statute and the Model City Tax Code; and
c. standardization of definitions of taxable transactions between taxing authorities.
All three areas noted above were significantly modified by state legislation since the completion of the Task Force, as noted below.
a. options for a single point administration to avoid redundancies;
Original legislation called for the single point administration changeover to take place on January 1, 2015. The postponement by the Arizona Department of Revenue provision has moved the date to January 1, 2016.
b. identification of differences between state statute and the Model City Tax Code; and
c. standardization of definitions of taxable transactions between taxing authorities.
These two areas have been modified by multiple updates to the Model City Tax Code and the State of Arizona tax codes over the past few years. More modifications are expected in the future as the Cities and State continue to work through the simplification process.
Key Considerations:
If the City chooses to not approve the IGA with the Arizona Department of Revenue, the City will not have the authority to issue TPT licenses, resulting in approximately $30,000 in uncollected license fees. In addition, the City may not receive the sales tax revenues from unlicensed businesses that do no remit taxes to the City.
Expanded Financial Considerations:
None.
Community Involvement:
Inform